Compliance with Collective Wage Agreements Act violates European law

The European Court of Justice has decided: North Rhine-Westphalia cannot stipulate a minimum wage for employees from other European countries in public invitations to bid. A Polish subcontractor cannot be forced to pay EUR 8.62 per hour. The North Rhine-Westphalia Compliance with Collective Wage Agreements and Procurement Act violates European law with this obligation. The European Court of Justice considers this an infringement of the freedom to provide services (judgment of September 18, 2014, C-549/13).

"The decision is explosive, because Bundesdruckerei GmbH, a subsidiary of the Federal government, filed a complaint against the North Rhine-Westphalia law and the European-wide minimum wage stipulated there," explained Dr. Ute Jasper, public procurement law expert at Heuking Kühn Lüer Wojtek in Düsseldorf. The Federal Printing Office wanted to use a Polish subcontractor and therefore did not want to accept a minimum wage of EUR 8.62 for work done abroad. It challenged the Compliance with Collective Wage Agreements Act before the Arnsberg Procurement Chamber. Successfully. The European Court of Justice confirmed upon submission of the Procurement Chamber that the European-wide uniform minimum wage for public contracts violated the freedom to provide services in Europe.

"The decisive argument of the European Court of Justice is the free European market: Every company must in principle be allowed in Europe to negotiate with its employees regarding the level of wages," said Ute Jasper. "A Member State may not level different wage grades to the detriment of competitors in other States. In the case of the low cost of living, for example, in Poland, the same need for protection does not exist for employees as does in Germany."

What does that mean for public contracts in Germany? Whoever participates in an award procedure is not bound to German minimum wages for work done abroad. For example, busses may be built in Hungary or the Czech Republic by the bidder or computers may be supplied from India or China by subcontractors, without having to prove that German minimum wages were paid there.